The foreign representative of a long-time bankrupt businessman accused of concealing his assets and smuggling a US$30 million yacht into Brazil has filed Chapter 15 recognition proceedings in Miami.

On 8 November, Fernando Correia of Rio de Janeiro-based Carlos Magno Nery & Meiros filed a petition in the US Bankruptcy Court for the Southern District of Florida, asking the court to recognise the Brazilian involuntary liquidations of copper manufacturer SAM Indústrias, its parent company Boulder Participações, and Boulder’s majority shareholder Daniel Birmann.

Birmann and the two companies have been in insolvency proceedings for over a decade, after SAM defaulted on 40.1 million reais (US$14.5 million) worth of debentures back in December 2004.

Back then a Rio court issued a bankruptcy order against SAM under the Brazilian Bankruptcy Law after it also closed down its principal place of business.

Private pension fund Braslight, which held the defaulted notes, filed a petition for the involuntary liquidation of SAM and asked the court to extend the order to Boulder and Birmann – as the ultimate beneficial owner of the companies.

The Brazilian court found that SAM’s main assets were 135 million reais (US$36.05 million) worth of loans to Boulder, and made the requested order in February 2008.

The court said that Birmann had caused SAM’s collapse by transferring all of its available funds to Boulder and leaving it without sufficient liquid assets to pay creditors. Boulder then used the funds to make additional intercompany loans to Brazilian bank Banco Arbi, which is owned by Birmann’s family.

Braslight was made the judicial administrator by the court, but last year Head Judge Maria Ruckerreplaced the pension fund with Carlos Magno, noting the proceedings had “not had an actual solution for several years”.

Fraudulent transfers

As well as the bankruptcy proceedings, the Brazilian Securities Exchange Commission (CVM) also launched an action against Birmann.

According to a declaration filed by Correia in the US court, the CVM found that the loans extended to Banco Arbi were contracted under much more favourable conditions than those offered by the market and concluded that Birmann’s actions were an “abuse of control”.

It imposed a fine of 234 million reais (US464.88 million) on Birmann – “the largest fine ever imposed to an individual by the CVM” according to Correia.

“During the bankruptcy proceedings, Daniel Birmann was required to disclose of his assets to the Brazilian court, which he has failed to do,” Correia says. “Instead, it appears that he has fraudulently transferred assets to his family members in order to avoid enforcement of the bankruptcy order and to conceal his assets from creditors.

Brazil’s department of revenue discovered a further attempt to hide assets in 2012, when it seized a yacht called “Big Aron” in the city of Salvador. The yacht was registered in the name of Isle of Man-incorporated company Tango Bravo, which had applied for a tax-free admission on the grounds it was a non-resident.

But the authorities suspected that Brazilian resident Birmann was the actual owner and concluded that with Tango Bravo he had “smuggled” the yacht into the country.

The name “Big Aron” caught the attention of the authorities because Birmann’s father was named “Aron Birmann” and, upon further analysis, the department of revenue learned that Birmann and his family were consistently registered as guests on trips in Brazil and elsewhere.

After conducting investigations, the CVM found that Tango Bravo was held by another entity in the Cayman Islands, which in turn was held by a Panama-incorporated entity with a single shareholder: Birmann’s mother.

With a value of 60 million reais (US$30.1 million), the CVM sought to levy on the yacht and use the proceeds to pay off the fine it had imposed on Birmann. A federal judge in Rio, Judge Fatima Sequeira made such a seizure order in 2015.

But the following year, the department of revenue discovered furniture and appliances had been “stolen” from the yacht and transported to a Banco Arbi address.

Public prosecutors were informed, and a criminal lawsuit for embezzlement and misappropriation was filed against Birmann last year.

With counsel from Gregory Grossman of Sequor Law, Correia filed the Chapter 15 proceedings in Miami “in furtherance of a worldwide pursuit of assets” to satisfy unpaid claims.

Birmann has a Florida driver’s licence listing an address in Florida, Correia says, and the debtors’ have assets located in the United States.

Judge Robert Mark has listed the matter for a hearing on 4 December.

In the United States Bankruptcy Court for the Southern District of Florida, Miami Division